chapters in trade agreements that grant foreign companies far-reaching powers to sue a government simply for issuing regulations that impact their investments. Recently, there has been a textbook example of how the investor-state dispute settlement (ISDS) tribunals that adjudicate corporate sovereignty cases are literally
. A post on The Hill explains the background:
A company sought to develop a mining and marine terminal project in Canada, but it had to obtain approval from provincial and federal authorities. As part of that process, the company had to submit an environmental impact study (EIS) addressing the project’s potential impacts on the natural and human environment.
A panel of experts was appointed to review that study, and to issue a recommendation on whether the project should go ahead. The experts recommended against approval, partly on the basis that it would have been inconsistent with "core community values." As a result, the federal and provincial officials rejected the project. The company involved, Bilcon, appealed against that decision, but did so
invoking NAFTA's corporate sovereignty provisions. The ISDS tribunal ruled that:
The advisory panel's consideration of "core community values" went beyond the panel’s duty to consider impacts on the "human environment" taking into account the local "economy, life style, social traditions, or quality of life." The arbitrators then proclaimed that the government's decision to reject Bilcon's proposed project based on the experts' recommendation was a violation of the NAFTA.
As The Hill article points out, that shouldn't have happened:
The parties to the NAFTA -- the United States, Canada and Mexico -- have all repeatedly clarified that ISDS is not meant to be a court of appeals sitting in judgment of domestic administrative or judicial decisions.
Nonetheless, the ISDS tribunal's lawyers ignored the clear intent of NAFTA's corporate sovereignty provisions, and issued their judgment dismissing local decisions following national laws. Because of the astonishing way that ISDS works, Canada can't even appeal. However, as the article in The Hill points out, the situation would have been
even worsehad the ISDS tribunal argued correctly:
It shows that ISDS stymies crucial evolution in domestic law. Under the tribunal's reasoning, a breach of international law arises when government officials interpret vague concepts such as the "human environment" or "socio-economic" impacts using principles or terms not expressly found in earlier decisions. Yet, particularly in common-law jurisdictions such as the US's, law develops in large part through new interpretations, adapting to changing circumstances and times. If this evolving process were indeed a breach of international law, the US should expect to face significant liability to foreign companies, especially as ISDS is included in new treaties with capital-exporting countries.
In fact, there is a first hint that the US government is well aware of these huge problems with corporate sovereignty provisions, and that it is already preparing for the day when it loses a major ISDS case. That hasn't happened so far in part because relatively few foreign companies covered by existing trade agreements with corporate sovereignty provisions have major investments in the US that would allow them to make claims. However, that will change dramatically if an ISDS chapter is included in the TTIP/TAFTA deal currently being negotiated.
According to Public Citizen's calculations(pdf):
More than 3,400 parent corporations in EU nations own more than 24,200 subsidiaries in the United States, any one of which could provide the basis for an investor-state claim if TAFTA were to be enacted with ISDS.
That might explain a
very interesting aspect of the Fast Track Billreleased recently, as Sean M. Flynn, Associate Director, Program on Information Justice, and Intellectual Property Professorial Lecturer in Residence, American University Washington College of Law, explains:
The Trade Promotion Authority (TPA) bill that was released last week contains a fascinating Section 8 on "Sovereignty." The section appears intended to make all trade agreements with the U.S. not binding to the extent that they contradict any provision of U.S. law, current or future. If valid, the section would go a long way to calming fears in this country that new trade agreements, like the old ones, could be used by corporations or other countries to force the U.S. to alter domestic regulations.
However, Flynn then goes on to argue Section 8 actually has no effect in protecting US law, and that:
If Congress changes our law to be in violation of a treaty commitment, the only way to avoid liability for that change is to re-negotiate the applicable treaties to remove the confining language at issue.
That threat of being sued in international courts for non-compliance with treaties is precisely how corporations have used international agreements to force the signatories to strengthen protection for copyright and patents thanks to measures they themselves lobbied for, and to block any moves to change the law in favor of the public.Follow me @glynmoody on
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Friday’s fourth/dubbed “final” ministerial attempt to reach agreement failed. Global Trade Watch Director
